It is estimated that within the next year 650,000 new small businesses will be started. It is further estimated that 220,000, or 34%, of those new small businesses will fail within two years of their start date and that 400,000, or 62%, will fail within five years of starting.
One factor contributing to this rather sobering failure rate for small businesses is that many small business owners fail to obtain the data necessary to create realistic start-up budgets, and therefore begin the business venture by: being under funded for the actual start-up costs associated with the business; spending too much, or, in some cases, too little, start-up money overall; spending too much, or too little, start-up money in one or more budget categories; not knowing what the budget categories are; or generally having little, or no, idea of what the real cost of starting up the business will be.
Currently, the fact that many small business owners fail to obtain the data necessary to create realistic start-up budgets is relatively understandable. This is because the business start-up budget data is often not available at all, or if the data is available, it is often highly generalized, and therefore of limited value, and it requires considerable time and/or other resources to obtain and process the data into any meaningful result.
For instance, currently, a potential small business owner can track down some business start-up budget data through various public sources of data such as census data, better business bureau data, various chambers of commerce data, professional organization data, tax records, etc. However, this business start-up budget data often: is largely generalized and theoretical, i.e., is based on speculation and extrapolation rather than based on actual transactions involving actual businesses; is dated; is incomplete; includes data for both failed businesses and businesses that succeeded; and is highly regional in nature. Consequently, a potential small business owner can currently spend a significant amount of time and energy obtaining publically available business start-up budget data, which is often of limited value, for even a single potential business location. Of course, the problem is only further multiplied, often literally, if the potential small business owner is contemplating multiple potential business locations. In addition, there is no guarantee that, after expending the effort to obtain the publically available business start-up budget data, the potential small business owner will be able to identify the correct budget categories and amounts, and draw the correct conclusions, using the data.
In other instances, currently, a potential small business owner can hire a consultant to help estimate the start-up costs of a business. However, this is often a very expensive proposition and, in many cases, the consult still uses the types of publically available business start-up budget data discussed above that, as noted, often: is largely generalized and theoretical, i.e., is based on speculation and extrapolation rather than based on actual transactions involving actual businesses; is dated; is incomplete; includes data for both failed businesses and businesses that succeeded; and is highly regional in nature. Consequently, even in cases where the potential small business owner does pay the cost of a consultant, the consultant's base data, conclusions, and recommendations may, or may not, be particularly relevant to the potential small business and/or potential small business owner. In addition, consultant data is still often highly regional in nature so that a potential small business owner contemplating multiple potential locations may have to pay multiple consulting fees.
Currently, there are some tools, such as computing system implemented tools, which, will provide a potential small business owner with some indication of the cost categories of starting up a generalized business. However, these tools often provide only highly generalized categories applicable to multiple types of businesses and do not provide any real data at all, or any guidance. Consequently, these tools often provide merely a template of potential categories that must be filled in by the user with data obtained by the user. Consequently, these tools provide information that is often so generalized and theoretical that it is of little, or no, real value to the potential owner of a specific business.
In addition, currently, there are some tools, such as computing system implemented tools, which will provide a potential small business owner with some indication of the cost of starting up a business. However, once again, these tools often rely on business start-up budget data that: is largely generalized and theoretical, i.e., is based on speculation and extrapolation rather than based on actual transactions involving actual businesses; is dated; is incomplete; includes data for both failed businesses and businesses that succeeded; and is highly regional in nature. Consequently, these tools often provide data and recommendations that are so generalized and theoretical that they are of limited value to the potential business owner.
As a result of the situation above, currently, many potential small business owners, and current small business owners, have no simple, effective, and efficient mechanism for obtaining business start-up budget data that is relevant to their proposed business, or existing business, and is based on the actual expenditures and experience of actual owners of similar businesses in the desired location of the proposed business, or existing business. Without doubt, this situation contributes to the fact that significant amounts money, energy, and human resources, are expended, and arguably wasted, every day on the 62% of small businesses that will fail within five years of their start date.